Massachusetts does not have an inheritance tax. If you inherit money or property from someone, you will not owe the state anything simply for receiving it. What Massachusetts does have is an estate tax, which is paid by the deceased person’s estate before anything is distributed to heirs. It applies when the estate’s total value is more than $2 million.1Mass.gov. Massachusetts Estate Tax Guide
So the practical answer for most heirs is simple: no check to the state for the inheritance itself. But a few other taxes can still reach what you receive, and the estate tax may reduce what reaches you in the first place. Here is how each piece works.
The Estate Tax That Does Exist
The Massachusetts estate tax is a transfer tax on the total value of a deceased person’s estate, paid by the estate itself before assets go to beneficiaries.1Mass.gov. Massachusetts Estate Tax Guide The executor or personal representative files the return and pays the bill out of estate funds.
The tax applies when the gross estate plus adjusted taxable gifts is more than $2 million. A credit of $99,600 effectively zeroes out tax on the first $2 million, so only value above that threshold produces an actual tax bill.2Mass.gov. Massachusetts General Laws c.65C Section 2A Rates are graduated, starting at 0.8% on the first taxable dollars above the exemption and climbing to 16% on estate values above roughly $10 million.1Mass.gov. Massachusetts Estate Tax Guide
What Counts Toward the $2 Million
The gross estate is broader than most people expect. It includes real estate, bank accounts, investments, retirement accounts, and personal property. It also includes life insurance proceeds, even when the money is paid directly to a named beneficiary and never passes through the estate’s bank account.1Mass.gov. Massachusetts Estate Tax Guide That one surprises families often, because the death benefit still counts toward the threshold.
A 2024 change carved out one category. Real estate and tangible personal property located outside Massachusetts are no longer included in the gross estate of a Massachusetts resident.3Mass.gov. FAQs – New Estate Tax Changes A vacation home in another state no longer pushes the estate closer to the $2 million line. Intangible assets such as brokerage accounts, retirement funds, and bank deposits still count regardless of where the financial institution sits.
Nonresidents Who Owned Massachusetts Property
If someone who lived in another state owned real estate or tangible personal property in Massachusetts, that property can still trigger a Massachusetts filing. The filing requirement is based on whether the decedent’s total worldwide estate exceeds $2 million, not just the Massachusetts piece.1Mass.gov. Massachusetts Estate Tax Guide
The actual tax is then prorated. The state takes the ratio of the Massachusetts property’s value to the entire federal gross estate and applies that fraction to the computed tax. A nonresident who owned a $500,000 condo in Boston but had a $10 million total estate would owe Massachusetts tax only on the share attributable to the Boston property.1Mass.gov. Massachusetts Estate Tax Guide
Who Files and When
The executor files Form M-706, the Massachusetts Estate Tax Return, within nine months of the date of death, and payment is due at the same time.4Mass.gov. Instructions for Massachusetts Estate Tax Return Form M-706 An automatic six-month extension to file is available, but the estate must pay the estimated tax in full with the extension request. If the amount paid turns out to be less than 80% of the final tax, the extension is voided and late-filing penalties apply retroactively.5Mass.gov. Form M-4768 Massachusetts Estate Tax Extension Application Nonresident filings also require a Massachusetts Nonresident Decedent Affidavit, Form M-NRA.1Mass.gov. Massachusetts Estate Tax Guide
If the IRS later changes the federal taxable estate after the Massachusetts return has been filed, the executor must report that change to the Department of Revenue or face an added penalty of 10% of any additional tax owed.6Mass.gov. AP 612 – Interest and Penalties
One practical note for heirs who are inheriting real estate: Massachusetts places an automatic lien on any real property in which the deceased had an interest. The Department of Revenue issues a Certificate Releasing Massachusetts Estate Lien once the tax is paid, and until that certificate is issued, selling or transferring the property is effectively blocked.7Mass.gov. DOR Estate Tax Forms and Instructions
Taxes You May Still Owe on What You Inherit
Even without an inheritance tax, a few other taxes can reach you depending on what you receive and what you do with it.
Inherited Retirement Accounts
Traditional IRAs, 401(k)s, and similar pre-tax retirement accounts are taxed as ordinary income when you take distributions. That is true whether the account was yours all along or you inherited it. A non-spouse beneficiary who inherited after 2019 generally must empty the entire account by the end of the tenth year following the year of the original owner’s death.8Internal Revenue Service. Retirement Topics – Beneficiary
Under the finalized IRS rules, if the original owner had already begun required minimum distributions before death, the non-spouse beneficiary must also take annual distributions during that ten-year window. Waiting until year ten to withdraw everything is not an option in that situation. Spreading withdrawals across the full ten years often produces a lower total tax bill than taking a lump sum, because it keeps you from jumping into a higher bracket in any single year.
Capital Gains and the Step-Up in Basis
When you inherit property like real estate or stock, your cost basis resets to the asset’s fair market value on the date the owner died.9Internal Revenue Service. Gifts and Inheritances This step-up means you only owe capital gains tax on appreciation after you inherit. Sell inherited stock shortly after the owner’s death with little price movement, and the gain may be minimal. Hold it for years and sell at a higher price, and the gain is measured from the stepped-up value, not what the deceased originally paid.
Property Taxes
Inherited real estate in Massachusetts remains subject to local property taxes. Once the property is yours, the annual bills are your responsibility. If the home has been reassessed at a higher value since the original owner bought it, the tax amount may be higher than what the family paid for years. Worth factoring in before deciding whether to keep the property or sell.
Federal Estate Tax
The federal estate tax sits on top of the Massachusetts tax but applies only to much larger estates. For 2026, the federal basic exclusion amount is $15 million per individual.10Office of the Law Revision Counsel. 26 U.S. Code 2010 – Unified Credit Against Estate Tax That figure came from the One, Big, Beautiful Bill Act signed in July 2025.11Internal Revenue Service. What’s New – Estate and Gift Tax
Married couples can effectively double the exemption through portability. If the first spouse to die does not use the full $15 million, the unused portion passes to the surviving spouse, potentially sheltering up to $30 million.12Internal Revenue Service. Estate Tax To elect portability, the executor must file a federal estate tax return (Form 706) even when no federal tax is owed. The federal return is also due nine months after death, with a six-month extension available.13Internal Revenue Service. Filing Estate and Gift Tax Returns
Estates above the federal exemption pay a top rate of 40% on the excess. Because Massachusetts starts at $2 million and the federal threshold sits at $15 million, most estates that owe Massachusetts tax owe nothing federally. Very large estates face both.